German showdown with IMF looms as Bundestag blocks rescue funds

"Germany itself faces strict austerity to comply with the national debt brake," said the declaration, which will go to the Bundestag next week. Lawmakers said there is no scope to boost the EU's "firewall" to €750bn, either by increasing the new European Stability Mechanism (ESM) or by running it together with the old bail-out fund (EFSF).

The tough stance reflects popular disgust in Germany at escalating demands. Bowing to pressure, Chancellor Merkel's office said an increase in the ESM was "not necessary" since Italian and Spanish bond markets have recovered.